Doc's Orders: Hospital Construction Continues | Central Mass. health care orgs. pursue expansion plans despite the economic recession
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An artist's rendering of a new building planned for Heywood Hospital in Gardner.
In recent months, a number of big Boston-area hospital systems have cut their budgets for new buildings, worried about the recession’s effects on their financial positions. In Central Massachusetts, most planned hospital building projects are still moving forward, but executives are keeping a close eye on the economy as they shell out millions to make them happen.
Proceed With Caution
Athol Memorial Hospital is now going through the permitting and approval process to build an $11.9 million addition that will house a new emergency department. President Steven Penka said the hospital needs to keep up with emergency room use that has been growing 6 to 8 percent a year, and to update some aspects of the 55-year-old building.
Still, he said, there’s no doubt the economy makes him pause at the thought of spending all that money.
“Patients are holding off on elective surgeries, which means there’s a reduced revenue stream coming to hospitals,” he said. “I think there’s no doubt that the economy is hurting us like everyone else.”
Because of those issues, Penka said, he’s added new steps to the building process for the new addition. After getting all permits lined up, he said, he will go back to the board of trustees, which has already approved the project, for another OK before putting it out to bid. Then, after getting bids in, he will return to the board again for a final sign-off before shovels hit the ground.
“I think the economy has caused us to slow down,” Penka said. “We’re not as aggressive in our timelines.”
Yet, along with caution over expenditures, the economy also brings some hospitals an added impetus to improve.
Harrington Memorial Hospital in Southbridge is in the middle of a $12.5 million renovation project. It’s also planning to renovate some physicians’ offices in Charlton and Dudley, working on a cancer center on its Southbridge campus that will be a joint venture with 21st Century Oncology Co. Inc. Harrington is also planning a new medical office building in Charlton that will include an MRI machine, the results of which will be read by Harvard Medical faculty at Beth Israel Deaconess Medical Center.
Harrington CEO Edward Moore said the hospital sees growth as the key to digging out from operations losses that have plagued it in recent years. That’s especially important since the hospital is now also managing Hubbard Regional Hospital and working cooperatively to reduce its losses too, he said.
“What we need to do is forge ahead with growth plans, recognizing capital pressures,” he said. “If we don’t look forward, that’s not a good strategy.”
Moore added that continued construction is also a good thing for job-starved local economies.
Pick And Choose
John Polanowicz, president and CEO of Marlborough Hospital, said part of his strategy is to move forward with key improvements to help patients while delaying those improvements that aren’t time sensitive.
The hospital is working together with Southboro Medical Group to open a joint facility focused on services for women like digital mammography. While that project advances, Polanowicz said, Marlborough is delaying improvements to the walls of its main building. Rather than spending more than $500,000 to repair all four sides at once, it has spent just over $200,000 on the two most crucial sides and is waiting on the rest of the project, he said.
At Heywood Hospital in Gardner, a new $34 million building that will hold the emergency department and patient care units is moving forward on schedule, according to Lorie Martiska, vice president of community relations and development.
Martiska said part of the reason not to delay is to keep momentum up. If the hospital stopped and later restarted the project, she said, new construction codes that have gone into effect recently would add extra costs. She said the hospital would also have to start the financing process over from scratch, and it would be harder to keep donors on board with a capital campaign that is now in full swing and has already raised $7 million of its $8 to $10 million goal.
Still, Martiska said, a second project expanding the hospital’s medical oncology program will depend on whether the capital campaign is able to reach the higher end of its goal. In the current economic climate, she said, that’s a more difficult proposition than it would have been a few years back.
In some ways, though, the recession is actually a boon to hospital construction. Martiska said the contractor for the Heywood project quickly heard from more than 300 bidders with “very, very attractive” bids. She said the hospital expects building costs to be on budget or even lower.
Moore said he’s seeing the same effects, with costs for the Charlton medical office building now likely to be significantly lower than he could have expected in past years.
UMass Memorial Medical Center and the University of Massachusetts Medical School are also still pressing ahead with projects, according to spokeswoman Alison Duffy. The medical center recently finished the last part of its Heart and Vascular Hospital. The Medical School is on track with its new Advanced Center for Clinical Education and Sciences and it plans to break ground this summer on a new $540 million research center.
One factor that can be a wildcard for projects these days is financing. Moore said the current credit market can make it difficult to pay for projects to find backers, though he said Harrington’s current ventures are either already financed or getting help from the hospital’s business partners. At Heywood, though, Martiska said the credit market has been kind to the new building project.
“We have an incredibly attractive rate which we would not necessarily expect to get if the climate were different,” she said.
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